Talk to a CEO at any Vancouver financial technology company and you’ll be hard pressed not to walk away with at least one story about PayPal Holdings Inc. (Nasdaq:PYPL) dispatching mentors to the city’s burgeoning fintech scene.
The payments processor is poised to make its influence in B.C. even more permanent with the acquisition of Vancouver’s TIO Networks in a deal worth $304 million.
“It’s an incredible company,” TIO Networks CEO Hamed Shahbazi told Business in Vancouver after the sale was announced February 14.
“Dan Schulman, the [PayPal] CEO, has a tremendous vision that really aligns well with us, and his vision of financial inclusion is one we think gives us an opportunity to really amplify the scale in which our platform operates.”
TIO Networks provides online and mobile technology for bill payments. It processed more than US$7 billion in fiscal 2016.
In 2015, it acquired New Jersey-based Softgate Systems for $31 million. Shahbazi said at the time the deal would create North America’s largest walk-in bill payment network.
Walk-in bill payment networks assist customers lacking access to mobile or online payment options, usually older individuals or new immigrants.
“If you look at TIO as a strategic extension for PayPal, it makes a ton of sense,” said Mike Gardner, CEO of Vancouver-based fintech Agreement Express Inc.
“TIO as an omni-channel payment company stretches into the physical world of payment. … They transcend from the banked, all the way through the under-banked and unbanked, which is not something you would traditionally think of PayPal for.”
PayPal’s online money transfer service has 188 million consumers operating in 203 markets across the globe.
In October 2015, it partnered with the BC Tech Association to create a fintech hub in Vancouver to help startups innovate and generate revenue.
Alexander Peh, PayPal Canada’s head of mobile, told BIV in October 2016 the strategy is always to collaborate with small fintechs instead of competing with them.
“We’ve got things that scale that very few financial players can do,” Peh said.
“Why would they compete with us or, let’s say, fight us when they could be partnering with a brand like PayPal?”
In 2010, there were five fintechs operating in B.C. That number has grown to 29, according to the BC Tech Association.
The association’s CEO, Bill Tam, said PayPal’s role in the Vancouver tech ecosystem has been important for startups.
“Here in B.C. it’s really been an opportunity for them to expand their expertise and help companies get to the next level, and that’s why it’s been such a strategic and important relationship for us because of the impact they can bring,” he said.
But the TIO Networks acquisition has one “kick in the pants,” according to Gardner: it wasn’t a Canadian company that bought the fintech firm.
“He [Shahbazi] did the right thing for shareholders – 100%,” Gardner said.
“We have this challenge in Canada: we just don’t have organizations that are Canadian organizations that have the capital or the wherewithal or the position globally to be able to buy out a TIO and keep it in Canada.”
While Payfirma CEO Michael Gokturk agreed that not many Canadian companies can offer what PayPal has, he said the acquisition is a major win for the local firm.
“If a better offer came from a Canadian company, I’m sure the board of TIO would have considered that. Being acquired by PayPal is fantastic for TIO because it gives them global reach. Hamed is a great friend and an investor in Payfirma, so he supports the local economy. Not just by creating jobs but also by investing in startups, and advising them and mentoring them.”
Gokturk added that it’s a trait PayPal also shares.
“Alex Peh, somebody who lives in Toronto, with PayPal is out here all the time promoting the scene,” he said. “And that’s what PayPal does very well. The ability to partner, help and grow start
ups with partnerships.”
